Gold bullion – challenging $1,000

This short update comes to you from Cape Town airport where I am awaiting my flight to Johannesburg, and then to Frankfurt and finally Ljubljana (capital of Slovenia) where I will be spending the next few days with a group of South African business people.

I often argued the bull case for gold over the past few months. With gold having surged by $40 an ounce (+4.1%) to $994 this week, it would certainly seem as if renewed interest in the yellow metal is being stirred up.

As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history – and the US greenback is heading South – the longer-term fundamental case for the yellow metal is arguably positive.

Good news for the gold price was also reported by Paul Mylchreest’s Thunder Road Report (via Mineweb), stating: “Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!”

The shorter-term technical picture is also starting to look interesting. This is explained by Adam Hewison of INO.com who prepared a short technical analysis of gold’s most likely direction and key chart levels.

Seasonally, September also seems to be a good month for gold, with an average gain of 2.6% for the month since 1970.

Source: Plexus Asset Management

I am bullish on gold in the medium term, especially as I believe the vast money printing by central banks could set off strong inflation pressures down the road. It is only a question of time before the $1,000 level is breached and I will not be surprised to see bullion remaining in an secular uptrend in the medium term. Add the yellow metal to your portfolios on pullbacks.